Fuel industry warns Congress against energy bill

05 December 2007 20:35  [Source: ICIS news]

WASHINGTON (ICIS news)--Energy industry officials charged on Wednesday that a Democrat-sponsored energy bill now nearing a vote in Congress will likely lead to less energy production and could push the US fuels supply system to breaking point.

 

The American Petroleum Institute (API) urged members of Congress to vote against a combined energy bill that was patched together from separate House and Senate energy measures passed by those chambers earlier this year.

 

The combined bill raises fuel efficiency standards for US auto manufacturers, raises the target for biofuels, raises taxes and cuts tax breaks for oil and gas producers and requires electric utilities to generate more power from renewable sources such as wind, solar and geothermal.

 

“We are disappointed that this bill fails to recognise government projections that America’s energy demand will increase 30% over the next 22 years and that we will need all sources of energy, including oil and natural gas, to meet the country’s needs,” API President Red Cavaney said.

 

“An even greater disappointment is that this bill would likely lead to less energy production, not more,” Cavaney said.

 

In a letter to members of Congress, Cavaney cited the combined bill’s provision for some $21bn (€14.3bn) in taxes on oil and gas producers, including the repeal of about $13bn in tax incentives and credits for oil and gas production that were in the 2005 Energy Policy Act.

 

“The bill’s tax provisions take direct aim at companies’ ability to expand oil and natural gas production and refining capacity,” Cavaney said.

 

The final energy bill - which may be voted on by the House on Wednesday or Thursday - is expected to include a new target for a renewable fuels standard (RFS).  The Senate energy bill approved earlier this year called for 36bn gal/year of biofuels production by 2022, but it is not yet certain that the Senate language will survive in the combined bill.

 

However, an increased RFS target is almost assured, and the combined bill calls for increased production and use of biodiesel and cellulosic ethanol.

 

“The biofuels mandate in the bill will require huge volumes of a variety of advanced biofuels, betting on yet-to-be-achieved technological breakthroughs [in cellulosic ethanol production] to meet the requirements,” Cavaney said.

 

“If this bet goes wrong, America’s energy consumers would bear the burden,” he said, adding: “The renewable fuel provision sets up a new crazy-quilt of boutique biofuels that could strain, indeed could break, the nation’s fuel supply system.”

 

($1 = €0.68)

By: Joe Kamalick
+1 713 525 2653

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